Palmer v. Columbia Gas of Ohio, Inc.

Decision Date22 May 1973
Docket NumberNo. 72-1772.,72-1772.
Citation479 F.2d 153
PartiesMorris A. PALMER et al., Plaintiff-Appellee, and Alice Taylor et al., Intervening Plaintiff-Appellee, v. COLUMBIA GAS OF OHIO, INC., Defendant-Appellant.
CourtU.S. Court of Appeals — Sixth Circuit

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Cary Rodman Cooper and Richard S. Walinski, Toledo, Ohio, for defendant-appellant; Franklin F. Hayward, Hayward, Cooper, Straub, Walinski, Cramer & Co., Toledo, Ohio, R. N. Mahaffey, Columbus, Ohio, on brief.

Russell A. Kelm and Joseph F. Vargyas, Toledo, Ohio, for plaintiff-appellee; R. Michael Frank, Frank S. Merritt, ABLE, INC., Toledo, Ohio, on brief.

Edward J. Dailey, National Consumer Law Center, Inc., Chestnut Hill, Mass., on brief for amicus curiae.

Franklin Arthur Martens, Ohio State Legal Services Assn., Columbus, Ohio, on brief for amici curiae.

Before EDWARDS, PECK and Mc-CREE, Circuit Judges.

JOHN W. PECK, Circuit Judge.

I

The plaintiffs, residential customers of natural gas supplied by the defendant Columbia Gas Company, brought this class action for injunctive and declaratory relief and for damages, alleging that their gas service had been terminated under color of state law in violation of their constitutional right to due process.

The Columbia Gas Company is a large, privately owned, pervasively regulated public utility company. It serves over 140,000 customers in the Toledo, Ohio, area,1 and all of its billing is handled by computer in Columbus, Ohio. A reading is normally taken from each customer's meter every other month, although on occasion no reading may be taken for a period of many months. When no reading is taken to reflect actual usage, the company's computer estimates usage and calculates an amount which is then billed to the customer. For some reason which is not made clear in the record, the computer usually underestimates in these situations; consequently, when an actual reading is eventually made after a series of several computer estimates, the resulting bill for actual gas consumed can be surprisingly high.2 In these cases, the customer, especially if poor, often has been unable to pay a bill several times larger than normal.

Whenever a monthly bill is not paid by the customer, the amount is carried forward and added to the customer's next bill. Whenever the second month's bill is not paid by five days after the due date and the amount in arrears is $20 or more, a notice of termination (a "shut-off notice") is sent to the customer:

If payment is not made within five days of the issuance of the shut-off notice, an employee of the company called "a collector"3 goes to the residence and terminates the service. Although this employee is authorized to grant temporary extensions of time in which payment may be made, he is under no obligation to inform the occupants of the premises that he is about to terminate gas service, and he usually will make no contact at all with the occupants, even to verify the correctness of the address.4

The evidence established that however imperfect the company's procedure was in theory, in practice it was more so. Significant and tragic mistakes were often made; for example, one witness testified that his gas service was terminated even though he had paid his bill in full upon receipt of a final notice. One of the intervening plaintiffs testified that his gas service was unexpectedly terminated on January 4, even though he had paid his bill, by mail, on December 30. When he contacted the company by telephone and informed them that he had paid the bill, an employee of the company replied: "Tough. Pay the bill again." This customer had seven children, and the temperature in his house dropped to 45 degrees before service was eventually restored through the intervention of the Board of Community Relations.

Additional confusion is introduced into the company's procedures by the fact that when a customer did make special arrangements for deferred payments of a larger than usual bill, a shut-off notice would be sent with each monthly bill, which the customer would be instructed to disregard. For example, one plaintiff testified that after having been billed about $12.00 a month for a series of about 5 estimated bills, she received a bill for actual usage for over $197.00. She made special arrangements to pay this large amount over a period of months, during which time she received a shut-off notice each month and an additional notice requesting that she disregard the shut-off notice. Although she paid the stipulated amount monthly, her service was terminated in mid-December, until, through the eventual intervention of her church pastor, the company acknowledged its mistake, apologized and restored service.

Administrative and clerical errors also resulted in unpleasant surprises for the company's customers. One witness testified that he received on December 30 a notice that his service would be terminated if his bill were not paid by January 4. He mailed his personal check to the company on December 30, which was endorsed by the company and cashed on January 3. Nevertheless, on January 4, his service was terminated. The first that he, his three children and his pregnant wife learned of the termination was when it started to get cold in the house. The company showed that a clerical employee had misplaced the record of the customer's payment, thereby causing this unwarranted termination.

After two days of hearing what one court has aptly described as a bizarre "Orwellian nightmare,"5 the District Court concluded:

"The evidence as a whole revealed a rather shockingly callous and impersonal attitude upon the part of the defendant, which relied uncritically upon its computer, located in a distant city, and the far from infallible clerks who served it, and paid no attention to the notorious uncertainties of the postal service." Palmer v. Columbia Gas of Ohio, 342 F.Supp. 241, 243 (N.D.Ohio 1972).

The Court found that termination procedures of the company constitute action taken under color of state law because an Ohio statute, § 4933.12, O.R.C., authorizes the company to enter the premises of a customer who has not paid his bill for the purposes of disconnecting and removing its equipment.6 The Court also found that the termination procedures of the company "are clearly offensive to even the most elementary notion of what constitutes due process." 342 F.Supp. at 244.

Accordingly, the Court ordered that the company not terminate, interrupt, cut-off or interfere with gas service to any residential customer of the company in its Northwestern District (the Toledo area) except in conformity with the following conditions: Any individual employee of the company charged with the mechanical process of terminating the gas service of any customer must first speak personally with that customer or some responsible adult member of his household7 and inform him of his intention to terminate gas service to that residence. Should the customer indicate that his account with the company has been paid or that he disputes the amount of the bill, the employee shall not terminate the gas service for at least 24 hours. If the customer fails to contact the company in that time,8 his service may be terminated without further notice. If the customer is unavailable, the company shall send a notice to the customer via certified mail, return receipt requested, advising him of its intention to terminate service for nonpayment of bills unless, within 24 hours after the company receives the return receipt, the company receives payment or the customer notifies the company that the bill has been paid or that he is engaged in a dispute concerning the account.

If the customer communicates, by telephone or otherwise, with the company's office within 24 hours, the company may take no further action toward termination of service until some officer or employee of the company, no lower in position than Office Manager, Local Manager, or person who performs a comparable function, shall have addressed himself to the customer's communication, made inquiry into any factual disputes presented by the customer and made a direct individual response to the customer, explaining in detail the company's position.9 If the response of the officer does not resolve the dispute as to the amount claimed to be due from the customer, the termination of service shall be stayed upon the giving of bond with good and sufficient surety10 not to exceed the amount in dispute. Further resolution of the dispute may be made either by the action of a higher ranking officer or employee of the company which meets with the satisfaction of the customer or by litigation commenced by the company to collect the amount in dispute.

If the dispute concerns a deficiency which is a result of a series of underestimated bills, service may not be terminated for non-payment of the amount due, but the deficiency must be prorated and billed to the customer in monthly installments not greater than the average monthly amount for that residence for the previous twelve months. These prorated amounts may then be billed to the customer in addition to his regular current charges.

Finally, the Court's order provides that service may be terminated without notice of any kind in an emergency situation where the inhabitants or the public health or safety are threatened; following the correction of the cause of the emergency, service must be restored and terminated only in accordance with the provisions of the Court's order.

The District Court reserved judgment on the pending questions of the proper limitation of the class action aspect of the case and upon the question of damages. The Court certified that its decision involved a controlling question of law as to which there is substantial grounds for a difference of opinion such that an immediate appeal from the Court's order would materially advance the...

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